I identified an issue with one of our vehicle loans. The borrower is married, but she never legally changed her last name to her husband’s name. However, her vehicle title (gifted by a family member) shows her name incorrectly, with her husband’s last name. As a result, our loan officer executed all of the loan documents using an incorrect name, as shown on the vehicle title, instead of the borrower’s legal name, as shown on her driver’s license. Should we have the customer re-sign the loan documents using her legal name? Should we refile our lien on the vehicle?

In our view, whether your customer should re-sign the loan agreements and correct the vehicle’s certificate of title is a business decision.

In general, customers should sign loan agreements and security agreements using their proper legal names, in order to remove any potential hurdles to enforcing the agreements. The most prudent route here would be to have the customer re-sign the loan documents using her legal name (particularly because she has stated she is willing to do so).

Having said that, it is likely that the existing loan agreements would be enforceable, even though this customer did not sign them with her legal name. Several Illinois courts have held that a contract using the wrong name for a business is still enforceable. Sullivan v. Cox, 78 F.3d 322, 326 (7th Cir. 1996) (a contract was enforceable even though it failed to include the full name of a business that was a party to the contract); Bires v. WalTom, LLC, 662 F. Supp. 2d 1019, 1037 (N.D. Ill. 2009) (a contract was enforceable even though it misnamed a business’s name in the contract preamble), citing Malleable Iron Range Co. v. Pusey, 244 Ill. 184 (Ill. 1910) (a contract was enforceable even though it improperly stated the name of a corporation, where the corporation’s identity was unmistakable and where the misnomer was inadvertent). We have not found any Illinois cases dealing with same issue with respect to individuals signing contracts on their own behalf, but we believe the same reasoning would apply.

As to the vehicle title, we also think it is unlikely that the customer’s failure to title the vehicle in her legal name will create any problems. In order to perfect a security interest in a car, the Vehicle Code merely requires your bank to submit the vehicle’s existing certificate of title, the required fee, and the name and address of the lienholder – there are no requirements regarding the debtor’s name. 625 ILCS 5/3-303(b). By contrast, the Uniform Commercial Code requires UCC-1 financing statements to use the name of an individual borrower only as it appears on the individual’s Illinois driver’s license, so as to provide certainty for subsequent creditors conducting lien searches under the debtor’s name. However, unlike liens recorded with a UCC-1 financing statement, vehicle liens are searchable by using a vehicle identification number (VIN), which may be why the Vehicle Code lacks similarly stringent standards for naming a debtor. (We should note, however, that it is relatively easy to correct the vehicle title with the customer’s legal name by using the Secretary of State’s website.)

We also should note that it is a crime when any person “knowingly provides false information to the Secretary of State on an application for vehicle title or registration.” 625 ILCS 5/3-712(a). That does not appear to have any bearing on this situation, as you have described it to us, and in the absence of any intent to defraud the Secretary of State, we do not believe this provision of the Criminal Code would be a consideration in this case.